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Illumina Scraps PCR Business, Citing Need to Prioritize Sequencing, Arrays

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Illumina's brief dalliance with the real-time PCR instrumentation and reagents market is coming to an end.

CEO Jay Flatley said during a conference call held this week to recap Illumina's third quarter earnings that the company is "exiting the PCR market" in order to train its R&D and commercialization resources fully on the "tremendous opportunities" that exist for its sequencing and array technologies.

Illumina's decision was based in part on its belief that sequencing has advantages over qPCR technology for gene expression applications, Flatley said.

"It's important to note that any decision to exit a platform or stop a program is always difficult, but we pride ourselves on being decisive and deliberate when it comes to allocating resources," Flatley said during the call.

Illumina entered the qPCR space in the summer of 2010 when it announced that it had acquired privately held nucleic acid analysis firm Helixis in a deal worth up to $105 million (PCR Insider 7/29/10).

Central to the deal was Helixis' compact, benchtop real-time PCR instrument, which Illumina rebranded the Eco system and said would cost about a quarter of the price of competing platforms — or about $14,000, a company official disclosed soon thereafter (PCR Insider 9/16/10).

By October 2011, Illumina had installed approximately 1,000 of the Eco systems, and Flatley noted at the time that the company planned to put more emphasis on its non-core product lines, which included Eco and BeadXpress. As part of this effort, Flatley noted that it would focus more on building out its real-time PCR reagents portfolio, since all of its revenue from that part of its business had been derived from instrument placements to that point (PCR Insider 10/27/11).

In July 2012 Illumina made good on its promise by launching outside of the US a portfolio of real-time PCR reagents, including probe-based chemistry and DNA-binding dye assays for gene expression analysis and high-resolution melting assays for genotyping studies (PCR Insider 7/26/2012). A few months later, Illumina signed on an undisclosed company to distribute its PCR products in the US (PCR Insider 10/25/2012).

Life Technologies has for several years been the market leader for qPCR instrumentation and reagents, with a handful of other companies garnering significant market share – a fact that an October 2012 survey of readers conducted by GenomeWeb and investment firm William Blair bore out (PCR Insider 10/25/12).

That survey also provided evidence that, although Life Tech was facing some pricing pressure from competitors in the real-time PCR market, Illumina's low-priced platform was likely not enough to spur users to switch to its products from Life Tech's products.

In response to an analyst's question during the conference call yesterday, Flatley suggested that Illumina had in fact successfully penetrated the market with its lower pricing, but other factors contributed more to its decision to exit the space.

"Certainly, it is a highly competitive market and we recognized that going in," Flatley said. "And part of our strategy, in fact, was to take the pricing in this market to a point that we thought Eco would support, and I think we were very successful strategically in doing that."

But Flatley also noted that "the reality is that many PCR applications, more and more of them, are moving towards sequencing. And I think, the third reality is that as we, year-to-year, compare the project opportunities we have for R&D investment, we never could get the PCR projects over the threshold."

Thus, Flatley noted, Illumina always had "more array and sequencing programs" with a higher return on investment than its PCR programs. "And for us to be successful in that market, we would have had to continue to evolve the instrumentation and develop lots more assays," he said. "And those investments just didn't make sense compared to our alternatives."

Illumina plans to end sales of the Eco qPCR instrument and NuPCR assays by the end of this year and will continue to provide service and support for the installed base for "a customary period," Flatley said.

The company noted that the financial impact to its future revenues and earnings per share is minimal, and that all operating expenses currently allocated to qPCR will be reprioritized to other programs.

Illumina declined to comment on whether it would attempt to sell its PCR-related assets to another company.

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